2017 News Archives

December 13, 2017

Investors Downgrade Administrators And Auditors According To New Corgentum Survey

A new survey by Corgentum Consulting of investor attitudes towards trends in key areas influencing operational due diligence
was released today.

A limited amount of those investors surveyed (16%) felt that administrators continued to remain the most important hedge fund service provider.
Similarly, only 12%, an even smaller group, felt that auditors were the most important.
In responding to the Corgentum survey, investors and operational due diligence analysts in particular felt the role of administrators and auditors had become
increasingly commoditized.

Survey respondents stated that when performing due diligence on hedge funds, many investors didn't feel there was a notable difference among the work of leading firms in either the administration or the audit space." This administrator and auditor fatigue represents a notable investor attitude shift from previous surveys. This is surprising because investors are increasingly relying on administrators and auditors in the areas of valuation and asset verification. By minimizing the importance of the oversight work of these providers, investors expose themselves to the risk of under weighting key operational and investment risks in the hedge funds they invest in, " said Jason Scharfman, Managing Partner of Corgentum Consulting.

Other key findings from the survey include:

Prime brokers (34%) and cybersecurity consultants (29%) were identified as the most valuable providers to this market.

Increased interest among funds in cryptocurrencies such as
Bitcoin, and the incorporation of blockchain technologies for trading and research were reasons cited by multiple investors for the growing importance placed on trade clearing and brokerage relationships. Other key reason investors cited for upgrading the importance of hedge fund prime brokers were increases in market volatility coupled with the growth in trading volumes fueled by quantitative strategies enabled by artificial intelligence.

There were growing fears among investors related to hedge fund cyberattacks, cloud integrity and the increased regulatory focus on cybersecurity. These concerns contributed to notable increases on the importance investors placed on hedge fund technology vendors. Similarly, 41% of investors felt one of the biggest risks facing hedge funds was the reputational and financial damage that may be done from a cyberattack carried out on a vulnerable hedge fund service provider.

Hedge fund reputational risks continue to remain in focus - 38% of investors indicated that within the past year they have expanded the scope of their
background investigation research during due diligence. Furthermore, 62% indicated that they have initiated ongoing investigative due diligence monitoring efforts within the past year.

The results of the survey were first presented exclusively to premium subscribers of Corgentum's monthly newsletter, Due Diligence News . Respondents represented a wide variety of hedge fund investors and operational due diligence analysts ranging from ultra-high net worth individuals and family offices to fund of hedge funds, pensions and endowments.

November 20, 2017

Corgentum Announces New Background Investigation and Operational Due Diligence Services

Corgentum Consulting
announced today
the continued expansion of its operational due diligence and background investigation services.

New Background Investigation Services

Corgentum's new expanded suite of announced today background investigation services for investors seeking to evaluate reputational risk at fund managers now includes:

Social Media and expanded Web searches – analysis and monitoring of social media related to funds and key personnel including Facebook, Twitter, LinkedIn, deep web and dark web searches

Ongoing investigative monitoring – Stay on top of new background developments with global watchlist notifications including monitoring of traditional media, court filings, regulatory and arrest records

Flash reports – red flag report findings available in hours, not days. Useful as a first level screen to learn of any critical background issues prior to dedicating further resources to the operational due diligence process

Focused searches – Investors can now run checks in specific areas as opposed to an entire background report. Examples include a focused regulatory infraction history search, or a bundled criminal and litigation search. Useful for large volumes of reports or limited-scope individual reviews.

Cybersecurity due diligence – Investors are increasingly exposed to cybersecurity risks at fund managers in which they invest. This service compliments Corgentum's existing due diligence offerings by conducting a deeper dive into a fund managers cybersecurity preparedness including an analysis of cybersecurity policies, network and firewall information security architecture and cyber testing programs. Corgentum's cybersecurity reviews also incorporate analysis of a fund's preparedness to deal with trending malware and hacker techniques to steal data and trick fund managers, and their service providers, into initiating fraudulent cash transfers including spoofing, social engineering and spear phishing attacks. These comprehensive reviews also evaluate broader operational risk implications of cybersecurity by evaluating compliance with regulations relating to investor data protecting including the forthcoming
General Data Protection Regulation (GDPR).

At the conference, Corgentum Consulting Managing Partner Jason Scharfman will be moderating a panel
on, "When and Why to Walk Away from Operationally Weak Managers." Topics to be discussed on the panel are anticipated to include:

Real life experiences in complex operational due diligence situations

Strategies for ODD professionals to provide feedback to fund managers so that they may mitigate complex operational challenges

October 5, 2017

Corgentum and Bloomberg Partner to Discuss Operational Due Diligence Trends

Corgentum Consulting and
Bloomberg have announced the hosting of a webinar focused on allocator perspectives surrounding the emerging operational challenges facing startup and established hedge funds.
The webinar Hedge Fund Startup: Allocator Perspectives will take place as part of the Bloomberg 30 Minutes on KYC and Beyond series.

September 19, 2017

Regulators and investors have continued to refine their due diligence efforts around evolving set of operational risks present in fund managers.
These efforts have included a renewed focus on the areas of compliance, valuation, cybersecurity, service provider oversight, governance and conflicts of interest managemenet.

In the article Mr. Scharfman discusses how operational due diligence professionals have increasingly tailored their ODD processes to encompass these evolving risks.
Further topics covered in the article include:

May 17, 2017

Corgentum's Next Webinar Announced For June - Launching and Maintaining an Operational Due Diligence Program

Corgentum Consulting today announced the details of the firm's next complementary webinar, Launching and Maintaining an Operational Due Diligence Program for Hedge Funds, Private Equity and Real Estate Funds.
The webinar will take place on June 7, 2017 beginning at 10:30am EDT and will be hosted by Corgentum Managing Partner Jason Scharfman.

As the complexity and scope of operational risks at fund managers continues to increase, many investors and operational due diligence groups are reevaluating their options, and considering launching a new operational due diligence program or reevaluating their existing efforts in this area.

Topics to be covered during the webinar will include:

Understanding the core elements of an operational due diligence program

Should you develop an in-house ODD program? Use a consultant? Or both?

How to document your operational due diligence policies and fund reviews

Customizing your due diligence process for different investment strategies

Operational due diligence checklists and due diligence questionnaires – do they add value?

PlanetComplaince, a website focused on global compliance regulation news, recently interviewed Mr. Scharfman for his insights on the book and emerging compliance trends.
The interview covers focuses on many topics addressed in the book including the intersection of technology and compliance and emerging trends in cybersecurity.
In regards to trends in evolving regulation Mr. Scharfman comments:

"Regulations continue to evolve which presents ongoing compliance challenges for professionals.
In Europe, a primary example of this would be the initial implementation of MiFID and subsequently MiFID II. In the US, there is an increasing interest to roll back
some of the restrictions implemented by Dodd-Frank which will require ongoing monitoring by compliance professionals.
Additionally, regulators are increasingly cooperating and sharing information.
Compliance professionals need to be conscious of the way different regulators may collaborate in interpreting information as they work to complete regulatory
filings in multiple jurisdictions."

The article is featured in the, "What a CAIA Member Should Know" section of the most recent CAIA journal (Q4 2016, Volume 5, Issue 3) and features excerpts from the book focused around compliance trends and regulatory reporting obligations of hedge fund managers.

To learn more about CAIA's Alternative Investment Analyst Review please visit the
CAIA website to read the journal's historical archives.

April 6, 2017

Meet Corgentum at GAIM Ops Cayman 2017

GAIM Ops Cayman 2017 is one of the largest hedge fund operational due diligence, compliance and risk management conferences in the industry.

The session will take place on March 30, 2017 beginning at 6pm and more information on the session is available at the
NYSSA website.
We look forward to meeting you at the event!

February 15, 2017

Corgentum Highlights Compliance Trends in Release for New Hedge Fund Compliance Book

With proposed deregulation in the US and the continued development of other global legislation, issues relating to hedge fund compliance continue to be in the headlines on almost a daily basis.
To focus on these trends Corgentum Consulting today issued a
press release highlighting the newly released book by Managing Partner Jason Scharfman’s on the subject of hedge fund compliance.
Hedge Fund Compliance: Risks, Regulation, and Management
provides straightforward practical guidance for the development and analysis of a hedge fund’s global compliance program.

"Compliance is one of the fastest growing areas in the hedge fund industry. Hedge funds and their investors have accepted that it is no longer simply a check the box exercise. With proposed changes to established legislation such as Dodd-Frank by President Trump, compliance continues to remain a dynamic area that is critically important for the successful management of a hedge fund,” said Scharfman.

A comprehensive reference for industry professionals, the book examines the core functions of a hedge fund’s compliance program including the duties of the Chief Compliance Officer (CCO) and General Counsel (GC). Additionally, the book analyzes the increased use of compliance consultants as well as the emerging role of compliance technology in areas including information security, trade and email surveillance, and business continuity.

“A strong hedge fund compliance program benefits both fund managers and their investors by improving operating efficiency, oversight and transparency,” said Scharfman. "This book provides the fundamental tools to develop an understanding of core compliance concepts – skills that are now an essential requirement for success in hedge funds. ”

January 25, 2017

There continues to be interest among investors in the new launches of both hedge funds and private equity funds. Additionally, there are a series of newer funds with relatively
short track records compared to their peers. While these newer managers may present compelling investment opportunities, in many cases there may be a greater degree of operational risk associated with these nascent funds.

Potential investors seeking to allocate to these funds often seek guidance on how best to approach an evaluation of the operational risks association with these managers
who have not had years during which to refine their operational procedures.

To comment on this trend Corgentum Consulting Managing Partner Jason Scharfman’s
will be a featured speaker at the upcoming Hedge Fund & Private Equity Emerging Manager Forum.
Mr. Scharfman will be giving a presentation entitled, "What do Investors look for when Performing Due Diligence on Private Equity Funds?"
Questions that will be addressed during the session include:

What do investors expect from their due diligence meetings?

What questions should investors ask?

How does the due diligence process differ depending on the private debt strategy?

How can investors measure operational risk?

The conference will take place Thursday March 9, 2017 at the offices of Grant Thornton in New York City.
For more information or to sign up for the conference please visit the
conference website.